Watch out for the pitfalls of a 0% balance transfer card
February 6, 2008
Experts are urging consumers to be mindful about the pitfalls of 0% balance transfer credit cards, stating that consumers need to read the small print to make sure that they do not end up paying hefty fees for transferring their balance or for using the card for purchases.
At this time of year, following the expensive festive season, many consumers decide to transfer high interest credit card balances onto 0% balance transfer cards.
However, in most cases a transfer fee equating to around 2-3% of the total amount being transferred is applied to the card, and consumers need to ensure that they are aware of the cost of transferring.
Another issue that consumers are being warned about is the fact that putting purchases on the card could result in any purchase balance getting trapped behind the transferred balance, where it will accrue interest whilst all repayments are applied to the interest free transferred balance.
According to one industry expert: ‘The main message for borrowers transferring a balance is always to read the small print and check out the way interest will be charged if you intend to spend on the card.
Some cards offer a 0% deal for balance transfers and new purchases - but the majority impose different rates on the transferred balance and new spending. If borrowers know they need to keep using a credit card, it may be preferable to have two cards - one to clear a balance and the other for new spending.’
